Kentucky Spirit Sues to Break Medicaid Contract

Struggling Medicaid operator Kentucky Spirit has followed through and is suing to end its contract with the state. Kentucky Spirit announced last week it was leaving the commonwealth, because it could not operate without massive losses. Now, it is suing in Frankfort courts to make it official.

In the lawsuit, the Medicaid operator claims it has lost $120 million since it first started in November 2011. It blames those losses on the state providing bad data to the company. And it says if a judge doesn't let it break its contract now, it will continue to lose more than $10 million a month.

The state has countered that it did not provide bad data to Kentucky Spirit and has previously said it will sue to recover the promised savings the operator was obligated to deliver.

Cabinet for Health and Family Services spokeswoman Jill Midkiff says the key priority is making sure Medicaid members receive care during this time.

"The Cabinet was not surprised by Kentucky Spirit's decision to file a complaint in Franklin Circuit Court. As Secretary Haynes noted in her testimony last week before Health and Welfare, Kentucky Spirit cannot cancel the contract during its initial term of three years. In an attempt to get out of the contract, Kentucky Spirit is claiming that the Cabinet did not provide enough information during negotiations of the contract to make an informed bid. Yet, Kentucky Spirit willingly signed a binding, three-year contract with the Commonwealth," she says.

Kentucky Spirit has retained Betsy Johnson, a former Kentucky Medicaid commissioner, as its attorney.